1. Field of the Invention
Embodiments of the invention generally provide transaction systems and methods for mobile telephone devices. More specifically, embodiments of the invention allow a mobile telephone, in conjunction with a payment transaction server, to be directly used as a payment device for a variety of financial transactions.
2. Description of the Related Art
As is well known, individuals may establish an account with a bank and write checks drawn on their account to pay for goods and/or services. Similarly, credit and debit cards have replaced the use of cash (and checks) in a large percentage of commercial transactions. However, fraud, theft, and other misuse of checks and credit/debit accounts is a serious problem, costing both banks and consumers substantial sums of money. For example, identity theft has become a significant source of fraud, resulting in financial losses to both banks and individuals. Identify theft generally refers to the co-option of another person's personal information (e.g., name, social security number, bank or credit card account numbers, etc.) without that person's knowledge coupled with the fraudulent use of such information. For the individual involved, the effects of identity theft may reverberate well past an initial theft of information—costing time and resources for the affected individual to address. For the bank, identity theft typically results in unrecoverable losses. Thus, both banks and individuals have a strong incentive to keep account data secure. At the same time, the convenience and near-universal acceptance of credit/debit cards for payment transactions has resulted in extremely widespread adoption of these payment systems both in the United States and around the world.
Another well known payment technique allows individuals to transfer funds from one person to another (or to/from a business) using stored value accounts. For example, gift certificates or gift cards may be purchased and used to store a fixed value amount until used. Other stored value accounts allow individuals to transfer funds from one source (e.g., a charge to a credit card or an ACH debit to a bank account) to another—effectively creating a stored value account for the recipient. The recipient in turn, transfers amounts from the stored value account to an actual account—from which the funds are made available. However, stored value accounts provide consumers with little protection against fraud, theft, or other misuse. Few merchants, e.g., will replace a lost gift card and few mechanisms are used to deter the use of a stolen (or simply found) gift card. Further, stored value accounts may limit the use of funds transferred to the stored value account, e.g., a gift-card is typically good for a single (or limited number) of locations. Further still, stored value accounts are frequently operated in a manner to avoid banking regulation, and thus often operate in a largely unregulated (and uninsured) manner.
At the other end of the spectrum, a sizeable number of individuals do not even have a bank account, and thus, cannot participate in a variety of transactions, e.g., on-line purchases, credit/debit card transactions, etc. As of February 2009, for example, an estimated 28 million people in the United States do not have a bank account—often because of mistrust, cultural, or language barriers. Outside of the United States, the percentage of the “unbanked” is even higher in many countries.
At the same time, mobile telephone devices have become highly sophisticated. In addition to conventional telephone functionality, current mobile telephones provide a handheld computing platform capable of executing a variety of software applications as well as connecting to a data network. Mobile telephones frequently include a web-browser application which allows users to access web sites—some developed specifically for such devices. For example, many banks have developed customized web-sites allowing their customers to access data related to their account directly on a mobile phone. Such websites typically allow users to view balances, transfer funds between their accounts, schedule on-line payments, etc. Similarly, users can make purchases from online merchants by providing credit card information while browsing a website using a browser running on a mobile phone device. While having access to this information from a mobile phone is useful, it essentially provides the same functionality as on-line banking and e-commerce services accessed from a desktop computer. That is, while some users can access banking information and e-commerce websites from their mobile telephone, the mobile telephone device does not, in fact, participate in a payment transaction.
Some approaches have been tried to allow a mobile telephone device to participate in payment transactions directly. For example, radio frequency ID (RFID) tags have been used to allow a mobile phone to be waived in front of a reader and have amounts deducted from a stored value account associated with the telephone or have amounts charged to a credit card account associated with the mobile telephone. However, such approaches turn the phone itself into a target for potential identity theft, fraud or other misuse, as identifying information and account numbers are stored on the mobile phone and subject to misuse when a mobile telephone is lost or stolen. Thus, current approaches for allowing a mobile phone to participate in payment transactions systems have not experienced widespread adoption—despite the overwhelmingly worldwide adoption of mobile phones generally.